Correlation Between Chung Hsin and Da Cin
Can any of the company-specific risk be diversified away by investing in both Chung Hsin and Da Cin at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Chung Hsin and Da Cin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chung Hsin Electric Machinery and Da Cin Construction Co, you can compare the effects of market volatilities on Chung Hsin and Da Cin and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Chung Hsin with a short position of Da Cin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chung Hsin and Da Cin.
Diversification Opportunities for Chung Hsin and Da Cin
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Chung and 2535 is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Chung Hsin Electric Machinery and Da Cin Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Da Cin Construction and Chung Hsin is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Chung Hsin Electric Machinery are associated (or correlated) with Da Cin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Da Cin Construction has no effect on the direction of Chung Hsin i.e., Chung Hsin and Da Cin go up and down completely randomly.
Pair Corralation between Chung Hsin and Da Cin
Assuming the 90 days trading horizon Chung Hsin Electric Machinery is expected to under-perform the Da Cin. In addition to that, Chung Hsin is 2.64 times more volatile than Da Cin Construction Co. It trades about -0.07 of its total potential returns per unit of risk. Da Cin Construction Co is currently generating about 0.18 per unit of volatility. If you would invest 5,410 in Da Cin Construction Co on November 5, 2024 and sell it today you would earn a total of 90.00 from holding Da Cin Construction Co or generate 1.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chung Hsin Electric Machinery vs. Da Cin Construction Co
Performance |
| Timeline |
| Chung Hsin Electric |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Da Cin Construction |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Chung Hsin and Da Cin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chung Hsin and Da Cin
The main advantage of trading using opposite Chung Hsin and Da Cin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chung Hsin position performs unexpectedly, Da Cin can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Da Cin will offset losses from the drop in Da Cin's long position.The idea behind Chung Hsin Electric Machinery and Da Cin Construction Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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